South Africa’s Vodacom accused of dodgy dealings in the Congo

In a lawsuit lodged at the Office of the Public Prosecutor in Kinshasa, Democratic Republic of Congo, on 17 December 2009, Congolese Wireless Network (CWN), the 49% joint venture partner in Vodacom Congo with Vodacom, has accused Mauritius-based Vodacom International – the subsidiary through which the Vodacom interest in Vodacom Congo is held – of persistently abusing its position as the senior joint venture partner and effective controller of the Vodacom Congo Board to plunder Vodacom Congo of capital and to avoid paying any corporate taxes in DRC.

Despite a track record of successful growth over the eight years since the joint venture was established, Vodacom Congo has never made a profit and has needed regularly injections of additional loan capital to fund its expansion.

CWN claims that these loan facilities have been provided by Vodacom International on manifestly uncommercial terms and conditions which have resulted in overpayment by Vodacom Congo to (or through) Vodacom International of up to S$180 million.

The loans have ostensibly been provided by Standard Bank of South Africa although Vodacom International has refused to provide CWN or Vodacom Congo with any copies of the documentation. In the main, the loans take the form of a revolving credit facility which places Vodacom Congo in a cycle of perpetual dependence.

Were it not for these unwarranted costs, Vodacom Congo, which is the country’s largest mobile phone network with 4.3 million subscribers, would long ago have moved into profitability.

CWN asserts that several years of negotiation to recover this sum for Vodacom Congo or otherwise to resolve the issue have been characterized by prevarication, procrastination and bad faith on the part of Vodacom International and has reluctantly concluded that only the prospect of legal action will bring this issue to resolution. If not settled out of court, the case is expected to come before a tribunal in Kinshasa in January or February.

Mr Alieu Conteh, chairman of both Vodacom Congo and of CWN, said: “To be compelled to resort to the law in resolving a business dispute is never desirable if an alternative can be found, but we feel we have been abused and exploited by Vodacom, and they have refused to take our grievances seriously. All we are seeking is justice for Vodacom Congo and for its shareholders.”